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Big Tech and AI have dominated market conversations over the last couple of years with chipmaker Nvidia seen as the darling of the space. The stock is up more than 1,000% over the last 5 years. But our next guest says the story of Big Tech dominance isn't new. Here with more, we've got Ahmed Banafa, who is the faculty professor in the College of Engineering at San Jose State University. Ahmed, great to have you here with us. Take us through the history of concentrated market leadership as you've studied it and how it compared to today.

Good talking to you, Brad. Well, it's it's I've seen this movie before. Here's what happened. We're talking about the nifty 50 in the 1970s, and then we moved all the way, you know, to the tech giants in the late 1990s when we had the.com. And then we have seen something about the Fang, FAANG, you know, in the 2010s, and now we're talking about magnificent seven. So, the concentration is not something new. It's it's a matter of what they are presenting. Now, this thing about the cycle itself and what we have seen in these seven fantastic seven here is basically what they are offering. I mean, in few words, I mean, they're dominating certain areas which is touching every level of the economy, which is AI, the cloud computing, the semiconductors, and also the consumer platform. This is why it's really significant.

And so, with this in mind, and and I'm glad you brought up Fang because we'd seen that hit so many different iterations. It was tough to keep track. We saw it go from Fang to Fangman to to Batman at one point as well. I mean, there's so many different iterations of these, but one thing that is really interesting that came to the top of my mind for this conversation, which is how are these companies at scale different than they were when we were talking about the nifty 50s back in the day?

That's a good question. There are three things that distinguish the seven, the magnificent seven, you know, you know, with the exception of Tesla because they're going through a tough time now, but it's still a solid company. Number one is they they make they make money. They have a lot of profit. And we have seen, uh you know, the the earning from meta 42 or 43 billion dollars and the same thing from Amazon, 143 billion dollars and 70 billion dollars coming from and come from Microsoft. And today, we're going to hear from from Apple. That's number one. They're making a lot of profit. Number two, they have cash. They have a reserve that it is a cash, you know, rich reserve. And number three, they are global. They are not limited within, you know, the United States or certain geographic area. So this is what makes this this, you know, seven is different from the ones before.

So about 30% of the S&P 500 is now just these seven stocks. How how big of a risk is that to the average investor?

It's it's really a high risk in this case. The reason for this, all what you need just two of them to stumble. And you know, they have a bad earning or they have a bad, you know, future look, and now we're going to have 30% of them of the of the S&P 500 really suffering from this. The key thing here about it is that investors is looking at a very important point here, which is the AI. I mean, the AI is not just what the products the company's going to sell or the services. It's what they're doing inside the companies. For example, Brad, uh you know, yesterday, the CEO of Microsoft, he said that 30% up to 30% of the code uh at Microsoft is done by AI. The same thing goes with the Alphabet or Google. Specifically, about 25% of the code is written by AI, which means they don't need that many people, which is going to reduce the expenses inside the company, increase the sales of the services outside the company. This is the difference.

And so, what makes these seven companies so hard to dislodge from their place at essentially the top of the the kind of chain that's really driving so much of the the market fervor right now?

Well, the what they offer and their position in the market and the market share they have. You're talking about a company like Amazon. I look at what their market share and what kind of services they offer. Look at Nvidia itself, I mean, the king of the semiconductor, especially the AI chips. Every time we think we are getting to the end of it, they come up with a new chip and then you can run this one with Meta. Meta is trying to expand by having their AI services or having other services that they're offering to the consumers. They understand that the competition is really tough, and everybody's looking at them as who's going to be the next, you know, out of that seven and then we'll take their place. But they understand this. They spend, you know, billions of dollars in R&D, billions of dollars in making sure they understand the market, and they're going to be first in the market with with a product that's related to the artificial intelligence, as we see this one is actually the future of the market.

Ahmed, thank you so much for taking the time here with us. Really insightful discussion. Appreciate it.

Thank you.